Headline earnings increased by 15% to R1.95 billion. A maiden interim dividend of R2.50 per share was declared.

Transcription

1 Headline earnings increased by 15% to R1.95 billion. A maiden interim dividend of R2.50 per share was declared. ARM completed the disposal of Lubambe Mine and increased its interest in Two Rivers Mine to 54%. Patrice Motsepe Executive Chairman

2 Khumani Iron Ore Mine Overview and strategy Patrice Motsepe, Executive Chairman

3 Disclaimer Certain statements in this report constitute forward looking statements that are neither reported financial results nor other historical information. They include but are not limited to statements that are predictions of or indicate future earnings, savings, synergies, events, trends, plans or objectives. Such forward looking statements may or may not take into account and may or may not be affected by known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such forward looking statements. Such risks, uncertainties and other important factors include among others: economic, business and political conditions in South Africa; decreases in the market price of commodities; hazards associated with underground and surface mining; labour disruptions; changes in government regulations, particularly environmental regulations; changes in exchange rates; currency devaluations; inflation and other macro-economic factors; and the impact of the AIDS epidemic in South Africa. These forward looking statements speak only as of the date of publication of these pages. The Company undertakes no obligation to update publicly or release any revisions to these forward looking statements to reflect events or circumstances after the date of publication of these pages or to reflect the occurrence of unanticipated events. 3

4 Group structure 100% 100% 10% 51% 100% 14.3% Platinum Ferrous Coal Copper Gold: Harmony PGMs Iron Ore Coal Copper 41.5% Modikwa 1 54% Two Rivers 2 50% Khumani 50% Beeshoek 20% Participating Coal Business (PCB) 3 40% Lubambe and Lubambe Extension Area 4 Nickel, PGMs & Chrome Manganese Ore Coal 50% Nkomati 50% Nchwaning 50% Gloria 51% Goedgevonden (GGV) 3 PGM Exploration Manganese Alloys 46% Kalplats 50% Cato Ridge 25% Cato Ridge Alloys 50% Machadodorp 27% Sakura 1 2 ARM s effective interest in Modikwa Mine is 41.5%, local communities hold 8.5%. ARM s interest in Two Rivers Mine increased to 54% from 9 November 2017 when the mine s amended mining right was executed by the Department of Mineral Resources. Charge Chrome 3 ARM s effective interest in GGV is 26% and 20.2% in PCB. 50% Machadodorp 4 The disposal of ARM s 40% effective interest in Lubambe and Lubambe Extension Area was completed on 22 December

5 Salient features Headline earnings increased by 15% to R1 945 million compared to R1 693 million in the corresponding period (1H F2017). Headline earnings per share were cents (1H F2017: 893 cents). Maiden interim dividend of 250 cents per share declared. 5

6 Salient features Basic earnings were R1 753 million (1H F2017: R254 million basic loss). The basic loss in 1H F2017 included an attributable impairment of the Nkomati Mine and Modikwa Mine assets of R711 million and R734 million after tax and noncontrolling interest, respectively. Higher US Dollar prices were realised for all commodities in ARM s portfolio except iron ore, platinum and chrome concentrate. The average Rand/US Dollar exchange rate strengthened by 4% to R13.39/US$ (1H F2017: R13.98/US$). Disposal of ARM and Vale s 80% interest in Lubambe Mine was completed on 22 December

7 Salient features ARM s interest in Two Rivers Mine increased to 54% from 9 November 2017 after the mine s amended mining right was executed by the Department of Mineral Resources (DMR). Cash dividends received from the Assmang joint venture were R1 000 million (1H F2017: R988 million). Since the period end, ARM received a cash dividend of R2 000 million from Assmang (in February 2018). Net debt reduced to R1 102 million (31 December 2016: R3 508 million). Net debt to equity reduced to 4.4% from 15.4% at 31 December

8 Safety Regrettably an employee, Mr Fabian Majoro, was fatally injured when he was exposed to irrespirable atmosphere underground at Modikwa Mine on 9 October The Board and management express their sincerest condolences to the family, friends and colleagues of Mr Majoro. The Lost Time Injury Frequency Rate (LTIFR) for 1H F2018 was 0.41 per manhours (1H F2017: 0.33). 8

9 Six-monthly headline earnings (R million) F2013 F2014 F2015 F2016 F2017 F2018 First half (1H) Second half (2H) 9

10 Six-monthly headline earnings per share (cents) F2013 F2014 F2015 F2016 F2017 F2018 First half (1H) Second half (2H) 10

11 EBITDA margins by commodity Coal (GGV) Manganese 30% 30% 41% 43% Iron Ore 38% 44% PGM 24% 26% Nickel 12% 18% Copper* (7%) (2%) (20%) (10%) 0 10% 20% 30% 40% 50% 1H F2017 1H F2018 * The disposal of ARM s interest in Lubambe Mine was completed on 22 December

12 ARM strategy Operational efficiencies Quality growth continues in ARM s existing portfolio of commodities Acquisitions and partnerships Africa World-class management team Owner operator Entrepreneurial management Profit and cash flow focused Employer of choice Partner of choice Partnering with communities, workers and other stakeholders 12

13 Operational efficiencies ARM s objective is to ensure that all operations are below the 50 th percentile Two Rivers Platinum PCB Coal Operations Sakura Ferroalloys (F2021) GGV Coal Manganese Ore Operations Khumani Iron Ore Beeshoek Iron Ore Modikwa Platinum Cato Ridge Ferromanganese Nkomati Nickel Commodity Unit cash cost 25% 50% 75% 100% Percentile on cost curve (based on cumulative production) 13

14 Nkomati Nickel Mine Operational review Mike Schmidt, Chief Executive Officer

15 Headline earnings / (loss) by division / operation six months ended 31 December R million % change ARM Platinum Two Rivers Mine (16) Modikwa Mine 36 (54) Nkomati Mine (39) ARM Ferrous (1) Iron ore division (15) Manganese division Chrome division* (9) 374 (102) Consolidation adjustment 29 4 ARM Coal Goedgevonden Mine 35 (26) PCB Operations ARM Copper** (6) (72) 92 ARM Corporate and other** (200) (292) 32 Headline earnings Headline earnings from continuing operations Headline earnings from discontinued operations (6) 306 (102) * The Chrome Division headline earnings for the six months ended 31 December 2016 include R378 million relating to the sale of ARM s effective 50% stake in the Dwarsrivier Mine. ** Results for the six months ended 31 December 2016 have been re-presented following the classification of Lubambe Mine as an asset held for sale. As such, intercompany interest accrued to ARM Company from Lubambe Mine of R130 million (1H F2017: R106 million) has been eliminated from both ARM Copper and Corporate and other. 15

16 Segmental EBITDA split by commodity (%) 100% 80% 6% 14% 4% 11% 4% 7% 8% 5% 12% 13% 31% 33% 60% 40% 59% 57% 44% 56% 57% 39% 20% 8% 10% 16% 19% 8% 24% 29% 5% 3% 19% 20% 0% (6%) (20%) F2013 F2014 F2015 F2016 F2017 1H F2018 PGM Nickel Iron Ore Manganese Chrome Coal (GGV) Copper 16

17 Segmental profit variance analysis Unaudited profit variance analysis Profit from operations before special items (R million) (351) (438) (9) (400) Increase Decrease H F2017 Exchange rate: Operations Exchange rate: Corporate* US Dollar commodity prices Volume Cash cost Non-cash cost Corporate and other 1H F2018 * Movement in realised foreign exchange gains and losses on ARM US Dollar loans to Lubambe Mine of US$198 million at 21 December 2017 (31 December 2016: US$170 million). 17

18 Changes in sales volumes 1H F2018 versus 1H F2017 sales volume changes (%) Increase Decrease 31% 17% 10% 0% 0% 3% 4% (14%) (31%) Nickel Eskom and local coal Copper Export coal PGMs Iron ore* Manganese ore* Manganese alloys** Chrome concentrate * External sales only. ** Includes Sakura Ferroalloys sales volumes. 18

19 Changes in average realised US Dollar prices 1H F2018 versus 1H F2017 average realised US Dollar price changes (%) Increase Decrease 69% 80% 9% 16% 24% 32% 40% (8%) (0%) (24%) (61%) Nkomati chrome concentrate ($/t) Two Rivers chrome concentrate ($/t) Platinum ($/oz) Export iron ore ($/t) Nickel ($/lb) Export thermal coal ($/t)* Export manganese ore ($/t) Copper ($/lb) Palladium ($/oz) Manganese alloys ($/t)** Rhodium ($/oz) R/US$ average exchange rate strengthened by 4% from R13.98/US$ to R13.39/US$. * Includes GGV Mine and PCB operations. ** Includes Sakura Ferroalloys. 19

20 Changes in average realised Rand prices 1H F2018 versus 1H F2017 average realised Rand price changes (%) Increase Decrease 62% 72% 5% 11% 18% 26% 34% (12%) (4%) (27%) (62%) Nkomati chrome concentrate (R/t) Two Rivers chrome concentrate (R/t) Platinum (R/oz) Export iron ore (R/t) Nickel (R/lb) Export thermal coal (R/t)* Export manganese ore (R/t) Copper (R/lb) Palladium (R/oz) Manganese alloy (R/t)** Rhodium (R/oz) * Includes GGV Mine and PCB operations. ** Includes Sakura Ferroalloys. 20

21 Unit cost changes by commodity 1H F2018 versus 1H F2017 on-mine unit production costs Rand per tonne basis (%) Nickel * Iron ore (18%) (1%) Increase Decrease South African Inflation (CPI) at 4.8% PGM: Two Rivers and Modikwa 0% Coal: GGV and PCB 18% Manganese ore** 23% Manganese alloys*** 23% (25%) (20%) (15%) (10%) (5%) 0% 5% 10% 15% 20% 25% 30% * The change in nickel unit costs refers to C1 cash costs net of by-products on a US Dollar per pound basis. ** Nchwaning II Shaft at the manganese ore operations was closed for the entire duration of 1H F2017. *** Excludes Sakura Ferroalloys Project. 21

22 ARM Ferrous: Iron ore Iron ore operational performance - 100% basis Sales volumes increased by 4% to a record 9.1 million tonnes. On-mine unit production costs at Khumani Mine were kept flat at R201 per tonne. Export sales volumes Local sales volumes Change in on-mine unit production costs Capital expenditure 000 tonnes 000 tonnes 1H F2018 1H F2017 % change % (1) 4 - R million Iron ore sales volumes (Mt) 100% basis* Beeshoek Mine on-mine unit production costs decreased by 5% Beeshoek Mine rail link to the Saldanha Export Channel has been commissioned F2013 F2014 F2015 F2016 F2017 F2018e F2019e F2020e Export Local * Per annum 22

23 ARM Ferrous: Manganese ore Sales volumes increased 10% to 1.6 million tonnes while production volumes increased 43% to 1.9 million tonnes. Average realised US Dollar prices for export manganese ore increased by 24%. Manganese ore operational performance - 100% basis Export sales volumes Local sales volumes* Change in unit production costs Capital expenditure * Excluding intragroup sales 000 tonnes 000 tonnes 1H F2018 1H F2017 % change (42) % 23 (11) R million (31) Manganese ore sales volumes (000t) 100% basis* On-mine unit production costs increased by 23% mainly as a result of Nchwaning II Shaft being closed for the entire duration of 1H F F2013 F2014 F2015 F2016 F2017 F2018e F2019e F2020e * Per annum 23

24 ARM Ferrous: Manganese alloys Average realised US Dollar prices increased by 69%. Sales volumes increased 17% to 162 thousand tonnes as the Sakura Ferroalloys Project ramped up. The Sakura Ferroalloys Project is now fully operational. Manganese alloys operational performance - 100% basis Sales volumes (South Africa) Sales volumes (Sakura) Change in unit production costs Capital expenditure 000 tonnes 000 tonnes 1H F2018 1H F2017 % change (41) % R million 17 4 >200% Manganese alloys sales volumes (000t) 100% basis* F2013 F2014 F2015 F2016 F2017 F2018e F2019e F2020e * Per annum South African operations Sakura 24

25 ARM Platinum: PGMs Two Rivers Mine production volumes decreased by 14% as a result of a decline in the grade due to split reef mining. Modikwa Mine production volumes increased by 16% due to higher tonnes milled which was offset by a 6% decline in grade. PGM operational performance - 100% basis Production 6E PGM ounces 1H F2018 1H F2017 % change Modikwa cash cost R/oz 6E Two Rivers cash cost R/oz 6E Capital expenditure * R million (10) * Capital expenditure for ARM Platinum including Nkomati Mine. Unit production cost (on a Rand per PGM ounce basis) increased by 14% at Two Rivers and 3% at Modikwa. PGM production volumes (000 ounces) 100% basis* ARM s interest in Two Rivers Mine increased to 54% from 9 November F2013 F2014 F2015 F2016 F2017 F2018e F2019e F2020e Nkomati Nickel Two Rivers Modikwa * Per annum 25

26 ARM Platinum: Nickel Nickel production increased by 2% however sales volumes decreased by 31% due to shipping delays. Nickel C1 cash costs net of by-products 1H F2018 1H F2017 % change On-mine cash cost* US$/lb Off-mine cash cost US$/lb (76) Nkomati Mine head grade reduced from 0.28% nickel to 0.24% due to processing of very low grade MMZ stockpile material. By-product credits US$/lb (6.23) (4.31) 45 C1 cash cost net of by-products US$/lb (18) On-mine unit cost* R/t milled Off-mine unit cost R/t milled (85) Construction of pile wall 2 in the Western Section to improve slope stability was completed. We continue to progress with buttressing work. The mine has reverted back to the old life-of-mine pit design. Nickel production volumes are expected to reduce from F2018 to F2020 due to the processing of very low grade MMZ stockpile and lower waste stripping rates. Total unit cost R/t milled (22) * On-mine unit production costs including capitalised waste stripping costs. Nickel production volumes (tonnes) 100% basis* F2013 F2014 F2015 F2016 F2017 F2018e F2019e F2020e * Per annum Revised guidance 26

27 ARM Coal: GGV and PCB ARM and Glencore are continuing negotiations to restructure the ARM Coal partner loans to improve ARM s obligations in terms of these loans. GGV on-mine unit production costs increased by 9% to R315 per tonne, impacted by a 9% decrease in production volumes. PCB on-mine unit production costs increased by 23% to R334 per tonne. Onmine production costs in the previous period benefited from the processing of stockpile ore built up during the Tweefontein Optimisation Project. GGV and PCB operational performance - 100% basis Total export sales volumes Total Eskom sales volumes GGV on-mine saleable cost PCB on-mine saleable cost 1H F2018 1H F2017 % change Mt Mt R/t R/t Saleable production volumes (tonnes) attributable* F2013 F2014 F2015 F2016 F2017 F2018e F2019e F2020e * Per annum GGV PCB 27

28 ARM Copper The disposal of ARM and Vale s interest in the Lubambe Mine was completed on 22 December Lubambe Mine operational performance - 100% basis 1H F2018 1H F2017 % change Milled tonnes 000t (1) Mill head grade % Cu Concentrator recovery % (3) Copper produced tonnes (3) Copper sold tonnes ARM realised net proceeds from sale of R492 million. C1 cash cost US$/lb Lubambe Mine net proceeds from sale attributable (R million) Cash proceeds from sale* 741 Less: Settlement of overdraft facility (164) Withholding and properties transfer tax (91) Foreign exchange movement 6 Net proceeds from sale 492 * Includes the reimbursement of funding provided to Lubambe Mine after 1 May 2017 of R155 million. 28

29 Net debt to equity ratio R million 1H F2018 1H F2017 F2017 Cash and cash equivalents Total borrowings (3 021) (4 843) (2 759) Long-term borrowings (2 311) (3 618) (2 002) Short-term borrowings (710) (1 225) (757) Net debt (1 102) (3 508) (1 271) Total equity Net debt to equity ratio 4.4% 15.4% 5.3% Less: Partner loans (1 692) (2 347) (1 719) ARM Coal loans from Glencore (1 578) (1 564) (1 605) Vale / ARM joint operation from ZCCM-IH - (669) - Modikwa loan from Anglo Platinum (114) (114) (114) Less: ARM BBEE Trust loans (Nedbank; Harmony) (473) (500) (528) Adjusted net cash/ (debt) (661) 976 Attributable cash and cash equivalents at ARM Ferrous 3 198* * Since the period-end ARM received a dividend of R2 000 million from Assmang. 29

30 Capital allocation: segmental analysis Capital expenditure (R million)* Actual 1H F2018: R1 147 million 1H F2017: R1 159 million F2013a F2014a F2015a F2016a F2017a F2018e ** F2019e ** F2020e ** ARM Platinum ARM Ferrous ARM Coal ARM Copper * Capital expenditure includes (i) deferred stripping at Nkomati and Khumani mines, (ii) Eskom sub-station as a finance lease at Nkomati Mine (iii) financed fleet replacement and sustaining capital expenditure but excludes the Sakura Ferroalloys Project. ** The forecasted capital expenditure for F2018 to F2020 is an estimation based on approved projects and projects under consideration. 30

31 Thank you We do it better 31